What rate of nominal growth is expected in sales if they are currently $1,000,000 and expected to reach $1,600,000 in 5 years?
A) 3.20%
B) 9.86%
C) 12.00%
D) 26.49%

Question

Quizplus · Accepted Answer

To calculate the rate of nominal growth, we need to use the formula:

Nominal Growth Rate = [(Ending Value / Beginning Value)^(1/Number of Years)] - 1

Plugging in the values given, we get:

Nominal Growth Rate = [(1,600,000/1,000,000)^(1/5)] - 1
Nominal Growth Rate = 0.0986 or 9.86%

Therefore, the best choice is B.

What Rate of Nominal Growth Is Expected in Sales If